Kash Jain ’24
Please note: this article does not constitute a professional/financial recommendation.
If you watched Super Bowl LVI, you might have seen advertisements promoting cryptocurrency with big-name celebrities like LeBron James and Larry David; however, despite the big names and big budgets, these ads were met with some audience disapproval–and rightly so.
Comparing cryptocurrency to things like the wheel and voting rights is, on the surface, a lighthearted way to suggest that despite the criticism and ridicule that cryptocurrency often elicits it is a legitimate, revolutionary product.
Doing this sort of marketing with an ordinary product may make sense. Using celebrities in advertising is a popular strategy because it can help brands build a strong image, stand out, and increase sales. Brands also often try to spin themselves and their products as “the next big thing,” urging consumers to buy something that the advertisement claims will be a massive success.
But doing this with cryptocurrency, pushing investment in such a fashion, is harmful to consumers who may view the endorsement of respected figures as a marker of the reliability of something that could cost a significant amount of money and could leave the consumer with nothing.
One could point out that many of these ads are advertising specific platforms that allow users to trade cryptocurrency instead of the currencies themselves, and that may be the case.
Cryptocurrency is highly volatile. At the time of writing this, Bitcoin has fallen 4.15% in the past five days; it currently sits at $42,601.10. Ethereum has fallen 9.25% in the same time frame; it currently sits at $2,943.65. The 52-week range for Bitcoin is $29,002 to $68,925. Ethereum’s 52-week range is $870 to $4865.81. This may be good for speculative investors who got in at the right time, but an investor could have lost up to 39% of the value of their investment in either currency.
By telling people that they could break into a new market and strike good without adequately informing them of the risk, these platforms are running dangerously close to misleading potential customers.
Businesses like Coinbase make their money through trading fees, meaning that they can profit by enlarging their customer base, even if their customers lose money on their investments. Thus, these businesses are incentivized to convince consumers that they can make money by investing in cryptocurrency through the company’s platform. Sure, they could lose customers if people repeatedly lose money and give up on non-traditional investing but not before at least some revenue has been made.
While these companies aren’t necessarily directly benefiting from consumers losing money, they do benefit from duplicitous advertising that suggests that people can make lots of money while quietly ignoring or placing only minute warnings of the massive risk incurred by investing in such volatile currencies.
The U.K.‘s Advertising Standards Authority (ASA) has gone after advertising in this vein. In December 2021, the ASA banned seven cryptocurrency ads, including a Papa John’s ad promoting free Bitcoin for a purchase in honor of “Bitcoin pizza day,” when two pizzas were purchased with 10,000 bitcoins, worth over $420 million today. The ASA concluded that the ad “trivialized” a “serious and potentially costly financial decision,” noting that it “contained no risk warnings about cryptocurrency.” The ASA also banned a Coinbase ad stating “£5 in bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade–get started on Coinbase today,” arguing that the ad implied that the value of Bitcoin is guaranteed to increase similar to how it changed from 2010-2021 without making it clear that a past increase in Bitcoin’s value does not necessarily mean that it will rise the same amount–or even rise at all–in the future.
Instead of buckling under crackdowns, cryptocurrency platforms are running even bigger ads than ever before, including during the Super Bowl, which was watched by an estimated 36 million households.
This means that tens of millions of potential investors are effectively being told that they should get into this new, cutting-edge market where they could make a lot of money off of their investments, but they are not being properly informed about the risks.
For the sake of consumer safety, these companies must be cautious with their advertising. They need to clearly present the risks of investing and avoid spinning cryptocurrency investments as a surefire way for consumers to make money.
Plus, improper advertising can hurt these companies too. Drawing legal action and controversy over advertising practices surely isn’t good for a company’s image. Additionally, tying a company to a particular meme investment–like how Coinbase has campaigned on Dogecoin –only works for however long said cryptocurrency is relevant.
While using celebrities to promote products is an effective strategy for brands, celebrities and whimsical skits are ineffective in safely messaging the risks of investing. At the very least, these companies should have more clear disclaimers. They should also promote their actual platforms and the features they offer instead of the currencies themselves.
By focusing on promoting their platforms and highlighting risks, these companies can more effectively market themselves without putting consumers in harm’s way.